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Private Annuity: What Is It and How Does It Work?

Private annuities are dealt with between two parties. One party, the annuitant, agrees to pay the other party, the annuity issuer, a set amount of money yearly in return for periodic payments. This continues for the rest of the annuitant’s life. A private annuity can be a helpful retirement savings tool, providing some extra income.

What does it mean to have a private annuity?

Private annuities are perfect for people willing to lock their money away for a while. Occasionally, a beneficiary will be mentioned in the agreement depending on which type of private annuity you choose. The annuity issuer makes a commitment to the annuitant to continue making regular payments to them for the rest of their lives. This kind of arrangement can be utilized as a savings vehicle for retirement or as a source of income throughout someone’s lifetime.

How Does A Private Annuity Work?

Private annuities can be immediate or delayed, depending on the individual’s needs. An immediate annuity, or “life annuity,” payments begin as soon as the contract is finalized. Payments from the annuity issuer are put on hold until a later date under the terms of a deferred annuity. Typically, this later date corresponds to the annuitant’s retirement. There are various ways in which private annuities can be arranged, but most of the time, they are either single-life or joint-life. In joint-life contracts, payments are made for as long as either the annuitant or their spouse is still alive, but in single-life contracts, payments are only made for the annuitant’s lifetime.

Instructions on How to Purchase a Private Annuity

The first step in purchasing a private annuity is finding an entity or individual that will issue you one! Since there is a wide variety of each form of annuity issuer, it is necessary to investigate to locate the one that caters to your requirements the most effectively. After you have identified a potential issuer, you will be required to supply them with some personal information, like your age, gender, and past medical history. Your life expectancy, a critical component in determining the total amount of your payments, will be computed based on the information you provide in this section. Next, you will need to determine the total amount of money you are willing to put into the annuity. This might be a one-time payment in the form of a lump sum of cash, or it can be a yearly contribution of a certain amount. Your payments will be increased according to the amount of money you contribute to the annuity. After you have collected all the data, you will have to sign a contract with the entity or individual that is providing you with the annuity. Before signing this contract, you must carefully consider its terms and conditions. After the contract has been finalized and signed, the money you have contributed to the annuity will be sent directly to the issuer, and you will start receiving payments.

Bottom Line

A private annuity is a contract between two parties that guarantees a certain amount of money to the beneficiary during retirement or for life. If you want some guaranteed payments and don’t mind having your money locked up for a time, then you should consider going with this option. Do some research on your own, and then get in touch with us if you’re interested in learning more about this investment. We are more than pleased to provide you with a price and respond to any questions you may have. Thank you so much for reading!
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Bio:
30 + years as a Financial Planner. Securities (Series 1,7, and 65) and Insurance Licensed. Retirement Planning including the actual planning of where your income will come from as well as a discussion of products to get you there. The market has been volatile since Covid broke out and many people are not comfortable with this. If you are retired we will look at your total income and tax situation. If you are still working we have some more time to plan.

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Thomas Sweet

Thomas Sweet has 30 + years as a Financial Planner. Securities (Series 1,7, and 65) and Insurance Licensed. Retirement Planning including the actual planning of where your income will come from as well as a discussion of products to get you there. The market has been volatile since Covid broke out and many people are not comfortable with this. If you are retired we will look at your total income and tax situation. If you are still working we have some more time to plan.

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